LCH.Clearnet Sets Inflation Swaps Clearing in Motion

LCH.Clearnet has become the first central counterparty in Europe to be authorised to clear inflation swaps.

The clearing house has already been authorised by the European Securities and Markets Authority (ESMA) to clear OTC interest rate, currency and commodity derivatives.

Trading in inflation-linked swaps is popular among asset managers and pension funds looking to guard against rises in inflation and interest rates.

The move to make inflation swaps subject to mandatory clearing has drawn differences of opinion from market participants. Clearing houses however, will be keen to offer clearing services for the products to allow margin efficiencies with inflation swaps and interest rate products.

“Clearing this new product, which shares structural similarities with other cleared interest rate derivatives, is a significant move for the market and underlines our commitment to providing safe and innovative risk management services to our members and their clients,” says Nathan Ondyak, head of Products and Markets, SwapClear, LCH.Clearnet.

Eurex is hoping to offer inflation swaps clearing services by summer 2015, according to a spokesperson, pending regulatory approval.